The era of pharma and biotech outsourcing is here to stay

What began as a trend across the pharmaceutical industry is now so firmly established it could be considered the norm; outsourcing of both R&D and manufacturing

Over the past ten years, more and more pharma and biotech companies have turned to CROs, CMOs and CDMOs to assist in the pre-formulation, development and manufacturing of their latest innovations.

Outsourcing is now a multi-billion dollar industry. Most spending is focused on early development, with around two thirds of annual spending being outsourced. Approximately 90% of that spend comes from small and mid-sized biopharma companies, accounting for 75% of the new drugs pipeline.

But why have so many pharma/biotech companies transitioned from doing their R&D in-house to outsourcing it?

Challenges in modern biopharma

If you’re reading this article, chances are you work in drug development yourself and are fully aware of the many challenges biopharma companies face in today’s environment. However, examining these challenges does help to explain why so many companies have turned to outsourcing as a solution.

Probably the most significant challenge in any industry is pricing pressures. It’s no different in pharma. The industry’s high profit margins make it an easy target for healthcare providers to squeeze them on costs and reimbursement. With diminishing profits, the choice between investing in your own infrastructure or enlisting the services of a third party with established expertise and equipment may not be such a difficult one.

Technological advances in R&D mean the speed of innovation has accelerated rapidly in recent years. It’s therefore increasingly difficult to stay ahead of your competitors. Working with a partner with proven experience in rapidly developing a new product is therefore appealing.

The number of generics manufacturers in the market mean companies can no longer fall back on their blockbuster drugs. They must stay ahead of the curve, finding new compounds and seeking to develop the next ‘big thing’. Generics firms have generally already been one step ahead, being early adopters of third-party manufacturers.

There’s no doubt that more pharmaceuticals are being produced, purchased and used than ever before. Ageing populations, expiring patents, growing antibiotic resistance and the advent of personalised medicine are just a few factors contributing to this phenomenon. It’s not surprising, therefore, that pharmaceutical companies may not be able to keep up with demand and are looking for external manufacturing partners.

The regulatory and compliance environment is also becoming ever more stringent and complicated, not to mention how regulations differ from country to country, or even from state to state. Such a complicated task will require a lot of input – be that internally or externally. Either way, some aspect of the development process might require some external assistance.

All of this means the biopharma industry must adapt and find ways to reduce development costs, speed up drug discovery and ramp up production.

The answer? Outsourcing.

The benefits of outsourcing

The primary and most obvious concern for many companies is costs; and outsourcing can be a very efficient way of saving on them. The fact is, you can avoid or postpone significant capital investments and thereby reduce expenditure by outsourcing your development to an agency that already has the relevant equipment and expertise.

Aside from costs, one of the key reasons many companies choose to outsource their R&D and manufacturing is that they’re able to access technologies that they do not have available in-house. These may be able to not only speed up the development process, but also quickly mass produce new products once the drug has been approved.

Advanced technologies can also significantly improve the quality of pre-formulation work, which in turn will produce a better quality final formulation. This stage of development is crucial in determining whether a drug candidate will become a commercial medicine, so investing in the right expertise to establish the fundamental physical and chemical properties of the molecule is worthwhile. Too many promising drugs have ultimately failed because of insufficient pre-formulation studies.

Alternatively, your organisation may simply lack the capacity to be able to manufacture a new compound internally once it has been approved. You may have hit the jackpot and your wonderful new discovery is required on such a scale that you need to outsource to a CMO or CDMO which can quickly upscale the production process and get your product to market.

Outsourcers can also offer a level of agility which is just not possible within large biopharma companies. Once a compound is looking promising, there is the need to accurately forecast the volume of product that will be needed for launch; yet it is almost impossible to predict what the competitive and reimbursement landscape will be like several years in advance. This is where outsourcing agencies come to the fore – offering flexibility which can cope with the unpredictable demand of their pharma clients.

Above all, outsourcing companies can be relied upon for their expertise. Specialist knowledge in areas such as process development for optimum freeze-drying cycles, which can be scaled up to a technically and economically feasible manufacturing process, is crucial in developing a commercially viable product – and that expertise might not be available in-house.

Choosing the right partner

The kind of organisation you turn to will depend on your company’s own experience with the drug development process. You may have strong commercialisation experience but lack the pre-formulation expertise, or vice versa. Or you may simply be looking to reduce the number of service providers you work with and are looking for a partner that can help you with multiple processes.